Dale Clark really wanted out of his engineering job in 2005 and he was looking for a way to earn the income that would allow him to quit.
He received a flyer touting a seminar about a revolutionary new way to invest in real estate called the “Equity Mill,” where participants would learn “how to earn 24-120 percent interest on your cash with little or no risk.”
Clark ponied up $7,300 to attend the two-day seminar by Rick Koerber at a Provo hotel, where he met Koerber and was “enamored” with his pitch.
“He said that there was an opportunity to invest in a fund that was returning currently 3 percent per month and if I invested in that fund I could get 3 percent interest per month,” Clark testified Wednesday at Koerber’s federal court trial.
Clark said he was so excited he immediately called his wife and told her about it. A $70,000 payment from a home-equity line of credit was soon turned over. Eventually, Clark invested $270,000 in Koerber’s operations, which Clark said he understood was for buying real estate.
For a time, the interest payments flowed in and Clark left his job. But then in June 2007, the payments ceased.
Koerber was eventually charged with operating a Ponzi scheme in which money from new investors is used to make interest payments to previous investors.
Asked by lead prosecutor Stewart Walz if he would have invested had he known that payments were coming from other investors, Clark said he would not “because I thought it was coming from real estate income, that it was income coming from a business.”
A few years ago, Clark said, he destroyed all his documents, knowing he would never get his money back and wanting to put the matter behind him. Clark said for the past 10 years he has been paying back his brother and father the money he convinced them to invest with Koerber.
Clark testified for the prosecution on the second day of Koerber’s trial on 18 charges of fraud, money laundering and tax evasion. Koerber has pleaded not guilty and his attorney has argued that his companies held properties worth $127 million before the real estate crash.
Also Wednesday, prosecutors used Koerber’s own words against him, playing parts of a recorded interview with federal agents in which Koerber said his businesses never made annual profits and that some investor monies or loans were being used to pay promised returns.
In a February 2009 interview with FBI Special Agent Cameron Saxey and IRS Special Agent Ronald Marker, Koerber admitted that his business hadn’t been profitable.
“I don’t believe that [in] any year it generated a profit,” Koerber said in a series of recorded clips played in court.
Koerber also told the agents that company insiders who had invested or made loans were aware that “money we had borrowed was being used as part of the money we were using to pay interest.”
The prosecution also played snippets of videotapes of seminars Koerber gave about his investment strategy. In one, he talked about the dot-com boom around 2000, when dozens of tech companies were spending millions of dollars of investor capital and not earning a profit while buying big houses and cars for themselves.
Those enterprises, Koerber said, were “doomed to failure because they didn’t know how to demonstrate a profit.”
When you’re a consumer of capital and not a producer of profit, Koerber said in another clip, “you will go out of business and take the people around you down with you.”
“You know what fraud is?” he asked in another. “Deception.”
The trial is to resume Thursday.